China Builds Industrial Ecosystems. Is Malaysia Building GLCs Instead?
Why One Produces Global Champions While the Other Often Struggles to Nurture Private Enterprise
A nation's competitiveness is not determined by how impressive its policy documents appear, but by how effectively those policies are implemented and transformed into a self-sustaining economic ecosystem.
One of the most striking differences between China and Malaysia is not whether they have industrial policies. Both do. The real difference lies in how governments define their role in economic development.
China: Supporting an Ecosystem, Not Just a Company
Over the past two decades, China's approach to developing strategic industries—such as high-speed rail, electric vehicles, semiconductors, artificial intelligence, and renewable energy—has followed a remarkably consistent pattern.
The government initially identifies a small number of promising companies and provides them with financial support, policy incentives, procurement opportunities, research funding, infrastructure, and regulatory facilitation.
However, the government's objective is not to support these companies indefinitely.
Once these firms achieve scale and technological capability, they become the anchor companies of an entire industrial ecosystem.
Around these national champions emerge:
Thousands of component suppliers;
Software developers;
Logistics providers;
Equipment manufacturers;
Research institutions;
Technology start-ups;
Professional service firms.
Large corporations begin investing in, purchasing from, mentoring, and collaborating with smaller businesses.
The result is not merely the success of several large corporations, but the emergence of an integrated and competitive industrial ecosystem.
The government's role gradually evolves from operating businesses to enabling ecosystems.
Its goal is not simply to create successful companies—it is to create globally competitive industries.
Malaysia: GLCs Grow Larger While Private Enterprises Struggle
Malaysia also established Government-Linked Companies (GLCs) with the intention of implementing national development policies, accelerating industrialisation, and strengthening strategic sectors.
However, over time, a different pattern has emerged.
Many GLCs have steadily expanded into increasingly broad commercial sectors.
Instead of primarily acting as catalysts for industrial development, they have become dominant competitors in many markets.
This raises several important concerns.
1. Crowding Out Private Enterprise
GLCs often enjoy advantages in access to financing, land, government contracts, and institutional support.
When private businesses are required to compete against government-backed corporations, the competitive landscape may become uneven.
As a result, many entrepreneurs hesitate to enter certain industries because they perceive the barriers to success as being too high.
Innovation inevitably suffers.
2. Weakening Entrepreneurial Incentives
Every successful economy depends on entrepreneurs believing that hard work and innovation can be rewarded.
If more strategic industries become dominated by GLCs, fewer private companies will have the opportunity to evolve into national champions.
Talented entrepreneurs may choose to invest elsewhere—or even relocate overseas.
Over time, the economy risks becoming increasingly dependent on a relatively small number of government-linked institutions rather than a continuous pipeline of new enterprises.
3. Failure to Build a Complete Industrial Ecosystem
The true value of a large corporation extends beyond its own profitability.
Its greater contribution lies in its ability to create opportunities for hundreds or even thousands of smaller domestic companies.
If large organisations focus primarily on expanding their own operations rather than developing local suppliers, SMEs, and innovative start-ups, the industrial ecosystem remains shallow.
Economic value and market opportunities become concentrated within a limited number of organisations instead of being widely distributed throughout the economy.
4. Ultimately, Taxpayers Bear the Risk
GLCs operate using public capital, directly or indirectly.
When investments fail or businesses underperform, the financial burden may ultimately fall upon taxpayers.
Private companies bear the consequences of their own commercial decisions.
Government-linked enterprises, however, often enjoy implicit public backing.
This makes effective governance, accountability, and capital efficiency particularly important.
China's Greatest Strength Is Its Ecosystem
China's electric vehicle industry provides an excellent illustration.
The success of major manufacturers has stimulated the growth of:
Battery producers;
Semiconductor companies;
Robotics and automation firms;
Charging infrastructure providers;
Software developers;
Precision engineering manufacturers;
Technology start-ups.
One successful company creates opportunities for hundreds—sometimes thousands—of other businesses.
Ultimately, the country's competitive advantage lies not in a handful of companies, but in the strength of its entire industrial ecosystem.
Malaysia Needs More National Champions, Not Simply More GLCs
Malaysia does not lack long-term economic visions.
Successive national development plans and industrial master plans have outlined ambitious goals for economic transformation.
The challenge lies in creating an environment where private enterprises can continuously emerge, innovate, and grow into globally competitive companies.
GLCs will continue to play an important role in sectors involving national security, critical infrastructure, public services, and natural monopolies.
However, in competitive industries, their greatest contribution may be to enable private enterprise rather than dominate it.
Imagine if every GLC were evaluated not only by its profitability, but also by how effectively it:
Developed local suppliers;
Helped SMEs scale up;
Enabled Malaysian companies to expand internationally;
Supported entrepreneurial innovation;
Attracted private investment into strategic industries.
Such performance indicators would encourage ecosystem building instead of organisational expansion.
Conclusion
The fundamental difference between China and Malaysia is not whether governments intervene in the economy.
Both governments play active roles in shaping industrial development.
The more important question is what government intervention ultimately creates.
Does it create an ecosystem that continuously produces entrepreneurs, innovators, and globally competitive companies?
Or does it gradually concentrate economic opportunity within a relatively small number of government-linked institutions?
China's experience demonstrates that government support can serve as a powerful catalyst for building vibrant industrial ecosystems capable of generating thousands of competitive private enterprises.
Malaysia's experience suggests that when state-linked companies become dominant participants in competitive markets, private-sector dynamism may be constrained.
The question, therefore, is not whether governments should intervene.
It is whether government intervention ultimately creates more entrepreneurs, more innovation, and more globally competitive Malaysian companies—or merely larger government-linked corporations.
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